Apria letter spotlights grandfathering provision

Friday, August 18, 2017

LAKE FOREST, Calif. – Grandfathering under the competitive bidding program came up recently when Medicare beneficiaries in California received a letter from Apria Healthcare saying that, as of August, they must transition to a contracted provider.

While the letter raised questions about whether Apria was exiting the market, it is likely a routine communication alerting beneficiaries that their rental period is up, says Apria CEO Dan Starck.

“We haven’t done anything to the nature that people are going out of business or exiting contracts,” he said. “We’ve been stable—the contracts we were awarded we are fulfilling, and the ones we weren’t we provided services on a grandfathered basis as long as we are able to.”

The grandfathering provision allows providers to continue serving patients for the duration of a rental period for DME, including oxygen and oxygen equipment.

It’s understandable that providers in California might feel the local respiratory market is on shaky ground. Earlier this summer, LifeCare Solutions announced it would exit the California market, blaming reimbursement reductions of up to 40%. That announcement came in the wake of Pacific Pulmonary’s agreement in April to pay $11.4 million to settle allegations it participated in a kickback scheme and its subsequent decision to lay off 170 employees in July.

Starck agrees reimbursement rates are “alarming,” but says the industry bears part of the blame.

“The pricing is alarming, but what is more alarming is whether people really understand why the industry is where it is,” he said. “The government didn’t bid these prices.”

AAHomecare hasn’t heard of any issues related to grandfathering, says Kim Brummett, vice president of regulatory affairs.

“Grandfathering was the right thing for CMS to do,” she said. “The patients didn’t have to switch suppliers—as far as they were concerned everything was the same. Every now and then, I heard a supplier say, ‘We’re not going to grandfather our patients,’ but it’s a stupid thing to do. You’ve lost the contract so you’ve lost revenue."


The market bid the prices that the government allowed to be bid in a flawed program containing no transparency, non-binding bids from entities with no intention of actually servicing said bids, and an economic model so fundamentally flawed that all prices will eventually become  zero.  The argument that the industry set the prices is only half accurate.